The South African Local Government Association (SALGA) issued a warning that the National Treasury's decision to temporarily suspend the Local Government Share payments for July 2026 to 69 municipalities should not negatively affect essential services or the financial stability of these municipalities.
The National Treasury announced on Tuesday that this measure was taken to ensure financial discipline, combat mismanagement of funds, and increase accountability among municipal officials and officers. The reason cited was the continuous non-compliance with the Municipal Finance Management Act (MFMA) and its provisions.
The municipalities affected by this decision span all nine provinces, and they have been sent written notification with an opportunity to provide justification as to why their allocations should not be frozen. The Treasury emphasized that this measure is corrective, not punitive, and that the temporary suspension is not expected to impact service delivery.
SALGA representative Motalatale Modiba acknowledged efforts to strengthen governance, financial discipline, and accountability at all levels of government. However, he warned that municipalities continue to face systemic and structural financial difficulties requiring urgent support and reforms. He stated that any share suspension must balance the goals of compliance with the impact on service delivery and municipal financial stability, and it is important to distinguish between actual management failures and deeper structural problems.
SALGA noted that the Treasury initially planned to halt share transfers for 99 non-compliant municipalities, but this number was subsequently reduced to 69 after consultations with the affected municipalities. Modiba noted that such a reduction demonstrates the value of proactive engagement and the willingness of municipalities to act when clear requirements and support are provided.
Modiba stressed that SALGA does not condone non-compliance, but highlighted that many municipalities operate under severe economic and financial pressure, which affects their ability to maintain financial sustainability and provide services. The association expressed concern that some of the reasons cited by the Treasury include municipalities failing to pay contributions to pension funds, unemployment benefits (UIF), and PAYE withholdings, which have already been deducted from employee salaries.
SALGA stated that these funds do not belong to the municipalities and should never be used for other purposes, as such behavior undermines employee rights, public trust, and exposes municipalities to financial and legal risks. Modiba confirmed that SALGA adheres to a zero-tolerance policy towards financial violations, persistent non-compliance, and management failures. He reminded that councils, accountants, and oversight bodies are responsible for investigating irregular expenditures, holding those responsible accountable, and recovering losses in accordance with the law.
Furthermore, the financial hardship of municipalities is caused by broader issues such as declining revenue, weak local economies, increasing demands for service provision, rising costs for electricity and water, aging infrastructure, distribution losses, and rising poverty. As of March 31, 2026, municipal consumer debt exceeded 480 billion rand, with state institutions and citizens being the largest contributors.
Modiba noted that the growing debt burden weakens municipalities' capacity to meet obligations to Eskom, water utilities, pension funds, SARS, and other creditors. He emphasized that municipal sustainability depends on paying for services, and reliable services are impossible when residents, businesses, government departments, and other consumers do not pay municipal bills. SALGA called on all consumers, including state organs, to settle outstanding municipal debts, while strongly recommending that municipalities improve revenue collection, credit control, and billing accuracy.
Modiba concluded that enforcement measures alone will not solve municipal financial problems, and long-term solutions are needed to address debt, unfunded mandates, fiscal imbalances, infrastructure backlogs, and revenue constraints. SALGA welcomed the Treasury's statement that the freezing process is corrective, not punitive, and that allocations can be released once municipalities meet the necessary conditions. The association stated its readiness to continue supporting affected municipalities in improving recovery plans, governance, compliance, expenditure control, and financial sustainability. SALGA remains committed to cooperating with the National Treasury, the Auditor-General, COGTA, provincial governments, and municipalities to implement immediate corrective measures and long-term structural reforms.
